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Published: Jun 08, 2023 14 min read

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When employees want a new job, it’s easy for them to type "full-time jobs near me" into an online search site like ZipRecruiter and look over their options. If they’re unaware of job openings within their own company, you may lose out on talented individuals already working within your business. Utilizing an internal mobility strategy is a great way to save time and money, as you won’t need to go through the hiring and onboarding process of new employees.

Read on to get a better understanding of internal hiring and how it can be beneficial to your business.

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What is internal hiring?

Internal hiring is the process of filling open positions in your company with your existing workforce instead of looking to hire new employees. There are different methods for effective internal recruitment. Some of the most common methods include:

  • Promotions: Promotions are standard methods for filling open job positions within a company. When employees demonstrate their skills and abilities to take on more responsibility, promoting them to a higher-level position will make for an easy transition and is considerably less risky than bringing in a new hire from outside the company.
  • Internal transfers: An internal transfer is when an employee transfers from one team or branch of the company to another. This movement is usually not a move up for the employee but a reassignment. While internal transfers can help fill open roles in another department, they may also create an open position that needs filling. Internal transfers can be especially useful to balance over and understaffed parts of the company.
  • Employee referrals: An employee referral program encourages existing employees to find potential candidates for open positions through their social networks. In most cases, if an employee referral leads to a hire, that employee will receive an incentive award, such as a cash bonus.

4 ways to leverage internal hiring

Most companies find the recruitment and hiring process challenging, time-consuming and expensive. Finding ways to leverage your business’s internal hiring can provide many benefits, like reduced costs and a shorter overall process.

1. Create an internal job board

Creating an internal job board can assist your internal mobility initiatives in several ways. By displaying internal job openings for existing employees, they can see potential opportunities and the qualifications needed to attain those jobs. Through these job postings, the employees can determine where the company is growing and set goals to develop and attain one of the listed internal positions.

An internal job board also instills the importance of continued development and growth in employees. A productive company culture like this will pay off in the form of more skilled employees with better job satisfaction because they have more options to advance and grow.

2. Implement an internal employee referral program

An employee referral program is an excellent source for internal recruitment. Adding an incentive such as a cash bonus for existing employees to find candidates for open positions opens your business up to various advantages.

Employee referrals cut down on your overall costs. If your employees do that job for you, you won’t need to depend as much on external recruiters to find potential candidates. Hiring through employee referrals also increases the chance of the new employee fitting in much better with the team and company culture than bringing in someone with no connection to your business.

3. Provide career development opportunities to current employees

Providing career development opportunities for your existing employees will not only help you fill higher-level openings when the time comes but will also increase the productivity and motivation of your staff. Focusing on employee growth and development can help retain employees and give them something to work toward.

4. Have a succession plan

Having a succession plan is crucial for meeting the future needs of your business. Succession planning is the act of identifying the important positions within your company and creating plans for existing employees to move into those positions. With a plan in place, you’re strengthening your company’s ability to overcome adversity if key leaders exit the company.

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Internal hiring process best practices

Internal hiring is a way to express gratitude toward employees and demonstrates that you want them to be a part of your team. Developing an effective internal hiring process is vital for improving your work culture and employee retention. Here are some practices to consider:

  • Ensure that employees are aware of the job boards and job openings
  • Encourage employees to take part in the employee referral program by offering incentives
  • Develop a culture where managers support the advancement of their employees
  • Create a consistent selection process for internal hiring
  • Provide constructive feedback to candidates with development plans

The pros and cons of internal versus external hiring

Internal and external hiring can both be effective ways to find great candidates for a job. Both methods present different sets of pros and cons that you should consider before starting your hiring process.

Internal hiring pros

Among the most important of all internal hiring advantages for your business is its ability to save money. When you need to attract talent from outside of your company you’ll spend money on advertising the role on job boards and events, recruitment agencies, running background checks and processing the applications. Hiring from within also reduces the likelihood of having to pay for things like relocation.

Another positive for hiring internally is that the process is much faster than hiring externally. When you draw from your existing talent pool, you probably won’t need to conduct background checks, and interviews will be more straightforward since current employees will have likely already demonstrated their suitability for the company’s culture and track record of success. The employee’s familiarity with the company will result in less training and onboarding. A shorter adjustment period means a less significant drop in productivity.

Finally, when employees know there is an internal recruitment process and that they have growth options, it will result in more productivity overall. Employees will invest more in their development in hopes of improving their roles over time. The possibility of internal mobility can be vital for motivating your workforce.

Internal hiring cons

There are benefits of internal hiring at your company, but there are also some drawbacks to be aware of. One of the more obvious disadvantages of internal hiring is that a promotion or transfer of an employee from one team or department to another will result in another open position. If your company continues to grow and expand, you will eventually need to fill these positions through external hiring.

Some complications can arise when a position comes about that multiple existing employees all apply for. While having to choose between two great candidates is a good problem to have, it can become complicated if the candidates work together and are both aware you’re considering them for the open position. Employees who don’t get hired for their desired position may develop negative feelings and choose to leave the company. Hiring from within your company can also bring about negative situations where managers block transfers to keep talent on their team.

A focus on promoting internally instead of hiring externally can also result in some stagnation. When you bring in new employees from outside of your company, they may require more training and take more time to become familiar with the culture, but they can bring fresh ideas that can enhance your company as well. Solely depending on internal hiring may bring about an overreliance on established solutions instead of looking at the existing problems from a new perspective.

External hiring pros

Although hiring externally can take a bit more time and money, there are some positives that you should consider. When you bring in talent from outside your company, you also bring in new perspectives, ideas and skillsets. Hiring recent graduates will ensure your company is up to speed on your industry's newest standards and techniques, helping keep your business competitive. Hiring from outside your existing employee pool can also allow for more networking opportunities with industry professionals. New external hires that have worked for other companies in your industry will also bring information about your competitors.

Internal hiring only reassigns an existing employee to a new internal position, but bringing in new employees from outside the company can assist in company expansion. If your company is ready to grow and open new teams and departments, you'll need to bring in more external talent to fill the needs.

Hiring externally continues to get easier with the advent of new technologies. Employers can now utilize tools such as the best recruiting software and applicant tracking system (ATS) to make their external hiring process more efficient. An ATS makes recruiting and hiring more manageable. By learning the best practices for using an ATS, you'll be able to save time and create a more efficient hiring process.

External hiring cons

One of the downsides of hiring externally is that it takes time. You’ll need to get the attention of a number of suitable external candidates, filter through the applicants, perform background checks and eventually conduct interviews, which can be a lengthy process.

Even after hiring a new employee, you may need to wait while they notify their current employer. Once the new employee is ready to start, you’ll need to spend time onboarding and training them before they can perform their job efficiently. Hiring internally, on the other hand, generally takes a lot less time.

The other main downside of hiring externally is the cost. Hiring recruiters and using staff hours to interview, onboard and train applicants will cost money. There is also the risk that the employee won’t fit in or dislike the position and leave within a few months, causing the entire expensive process of hiring externally to restart.

Is it better to hire internally or externally?

Deciding to hire internally or externally depends on the needs, available resources and flexibility of your business. Both internal and external hiring have upsides and downsides. If you want to promote a culture of growth and development as well as save time and money on the hiring process, you should consider hiring internally.

On the other hand, if you want to expand your business and incorporate fresh ideas and strategies into your workplace, even if it takes a bit longer and more money to do so, it's time to branch out and hire externally. You can maximize your results by utilizing the best job posting sites for employers (like ZipRecruiter, which gives you access to +3 million job seekers, as per ZipRecruiter internal data. Jan 1 to Dec 31, 2021) for your job promotions as well as creating a career page that will attract talented job seekers.

How long does internal hiring take?

Internal hiring doesn’t require extensive recruitment and takes a significantly shorter time than external hiring. The amount of time needed for internal hiring will vary by company depending on the internal hiring policy and process in place but could take as little as a few days. You may ask internal candidates a few short behavioral interview questions to get an understanding of their past work at the company.

In some cases, applicants may only need a recommendation from their manager and a short interview, while other positions may require a more extensive process. The time needed to complete an internal hire will also depend on the number of applicants interested in the opening.

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Do internal hires get drug tested?

A company’s drug testing policies vary by state, industry and the company’s discretion. Random drug testing is possible in some states, while employees must receive advanced notice in others. A company doesn’t need to drug test in the instance of an internal hire or promotion unless the new position requires heavy machinery or dangerous equipment.

Summary of Money’s how to leverage internal hiring

Internal hiring can be an excellent tool for your business if used efficiently. Developing an internal hiring strategy that includes creating an internal job board, implementing an internal employee referral program, providing career development opportunities to current employees and having succession plans can save your company a lot of time and money. However, you’ll need to develop internal and external hiring practices to run an effective business.

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